Cum-ex transactions in european countries : theoretical issues and emperical evidence
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- Master Thesis 
The purpose of this thesis is to shed light on cum-ex transactions in European countries. Cum-ex trading is an aggressive scheme where the aim is to receive multiple dividend withholding tax reimbursements for the same share. This scheme, along with a related strategy known as cum-cum trading, has, according the to the journalists in the widely publicised CumEx-Files, defrauded European states of 55 billion euros. The journalists, and the media in general, do, however, provide few specific details on whether European countries are mainly affected by cum-ex or cum-cum specifically. In this thesis we therefore look at the extent of cum-ex trading across 18 EU and EFTA countries. As the literature on the subject is very limited, and primarily centred around the cum-ex scandal in Germany, we contribute with some, to the best of our knowledge, new theoretical aspects on whether cum-ex would work in other countries. Most importantly, we argue that cum-ex trading is far less likely to be a problem in countries with a specific type of dividend administration. The system, which we refer to as a record date system, reduces the likelihood of situations where the wrong investors receives the dividend from the company, something which is a necessary condition for the cum-ex structure. In our empirical study, we take advantage of the fact that comprehensive cum-ex trading would result in a distinct trading pattern with very high trading volumes on specific days close to dividend distributions. With this in mind, we examine whether having a record date system affects the trading volumes on these days. We also study abnormal volumes in the 18 countries separately. When examining the specific countries, we use Germany and the United Kingdom as a basis for comparison. This is because we know for certain that cum-ex has been a substantial problem in Germany prior to 2012, while in the UK cum-ex is not possible. In contradiction to our theory, the results from our analysis do not indicate that cum-ex trading has been a larger problem in countries without a record date system. Furthermore, based on our analysis, we cannot state, with any degree of certainty, that cum-ex trading actually has been a substantial problem in any other European countries than Germany. However, the trading pattern in Sweden is worryingly similar to the one in the German cum-ex period. Moreover, other countries like the Netherlands, Italy and, especially, Spain also show very high volumes close to dividend distributions, which, at the very least, indicate a considerable amount of tax-motivated trading.